FCC Denies Liberty Media's Move To Control Sirius XM

May 7, 2012 at 5:24 AM (PT)

LIBERTY MEDIA was denied the ability to take control of SIRIUS XM RADIO by a federal regulator on FRIDAY (5/4). REUTERS reports the "decision by the FEDERAL COMMUNICATIONS COMMISSION came after LIBERTY MEDIA, SIRIUS XM's largest shareholder, in MARCH requested approval to take over the company's operating licenses, arguing that it had de facto control of SIRIUS XM with its large stake and board seats. LIBERTY acquired its 40% stake in 2009 as part of deal in which it loaned the satellite radio provider $530 million to help it avoid bankruptcy."

Last week (NET NEWS 5/2), SIRIUS XM CEO MEL KARMAZIN explained the company would retire debt at favorable terms, and not give back cash -- which would increase LIBERTY's stake. "We believe a good use of our cash is to return capital to shareholders," KARMAZIN said on the conference call. "We've talked about acquisitions as something we would consider, but there's nothing we're seeing out there we feel anxious about acquiring."

In FRIDAY's ruling, the FCC said LIBERTY's application was not "sufficient" to show it had control of SIRIUS XM. REUTERS adds, "LIBERTY still has other options to gain control of SIRIUS XM."

Did Liberty Truly Want Control?

The DENVER BUSINESS JOURNAL's GREG AVERY notes that "LIBERTY may not have an outright takeover bid in mind, but may instead be more interested in gaining influence over SIRIUS XM and its board."

"LIBERTY tends to rattle the cage a little in companies when they’re not happy about the direction things are going," WUNDERLICH SECURITIES analyst MATTHEW HARRIGAN told AVERY.